Cut Corporate America’s Free Lunch, Not Food Stamps

November 20, 2013

Terrance Heath

If Congress is serious about “fiscal responsibility,” they should cut corporate America’s “free lunch,” instead of voting for even more painful cuts to food stamps. It would bring in more revenue than any pseudo-savings from cutting food stamps.

The increase was meant to expire once the need subsided. The need hasn’t subsided. Thanks to an economic recovery in which 95 percent of the benefits have gone to the wealthiest 1 percent, the number of Americans who rely on food stamps has held at about 47 million.

Meanwhile, Congress is still negotiating over the farm bill. The House version cuts $40 billion from food stamps over a 10-year period. The Senate version cuts a tenth of that amount.

The food stamp program will therefore endure some cuts. Republicans are reportedly optimistic about the progress on final bill. “Progress” will probably result in a final bill that cuts far less than the $40 billion in the House version, but far more than the $4 billion in the Senate bill.

Corporate America’s “Free Lunch”

There’s another option that no one in Congress is talking about. In his New York Times column, Nicholas Kristof suggests that Congress eliminate what amounts to a “free lunch” for corporate America.

Let’s remember that the government already subsidizes lots of food. When wealthy executives dine at fancy French restaurants, part of the bill is likely to be deducted from taxes, which amounts to a subsidy from taxpayers. How is it that food subsidies to anemic children are more controversial than food subsidies to executives enjoying coq au vin?

Kristof is referring to the tax exemption for business entertainment expenses, which allows corporations to deduct 50 percent of business costs related to meals and entertainment from their annual taxes. Naturally, there are enough loopholes for corporations that know how to exploit them to deduct 100 percent of their “business-related” food, drink, and entertainment expenses.

Photo by Javier Estraviz @ Flickr.

It amounts to a “free lunch” for corporate America, with the 99 percent picking up the tab. Kristof doesn’t offer any estimates on the size of that tab. That’s because exact figures on how much corporate America’s “free lunch” is costing the rest of us are very hard to come by.

My search for such numbers led me to a 2009 proposal to eliminate the Business Entertainment Expenses deduction, written by Duke University professor Richard Schmalback, and Rutgers University professor Jay A. Soled. Schmalback and Soled cite a 1979 Library of Congress report which said the government could raise $1.2 billion in annual revenue by eliminating the tax deduction for business meals and entertainment.

That’s $1.2 billion in 1979 dollars. According to the Federal Reserve’s U.S. inflation calculator — is roughly $3.86 billion today. Simply eliminating the business meals and entertainment deduction could raise nearly as much revenue as the Senate farm bill cuts from food stamps. Generating nearly $4 billion in revenue, and eliminating the need to cut food stamps by the same amount, is reason enough to ask corporate America to pick up its own lunch tab.

Of the reasons Schmalback and Soled give for eliminating the deduction, one particularly relevant to the debate over food stamp cuts. The deduction favors the wealthy. In any business, middle and senior managers have the most discretion to rack up business expenses. When business expenses involve “substantial personal consumption,” the benefits are disproportionately enjoyed by “those at the upper levels of the organization.”

Those deductions cost more in revenue than deductions by middle- or low-income taxpayers, Schmalback and Soled explain, because of both the higher tax rates of high-income executives and the greater tendency of high-income taxpayers to itemize their deductions. (They hire accountants to ferret out and take advantage of every available loophole or deduction.)

The Benefits of Food Stamps

Conservatives claim food stamp cuts are about saving money, but the cuts come with considerable costs — both human and economic. Kristof points out that almost two-thirds of food stamp recipients are children, disabled, or elderly. Malnutrition is a real problem, as mounting evidence shows that the effects of poverty and malnutrition leave children less equipped to succeed in school and live productive lives as adults.

Photo by marsmett tallahassee @ Flickr.

Kristof also cites a National Bureau of Economic Research study that shows that those who began receiving food stamps as children had better health as adults. Women, in particular, who had benefited from food stamps as children were more likely to go farther in school, earn more money, and stay off welfare. When low-income families get food stamps, children’s health and nutrition improve. Children’s intake of iron, zinc, niacin, thiamine, and vitamin A increase.

Contrary to recent reports, food stamps do not contribute to obesity. Poverty contributes to obesity, because it limits choices. People who are “food insecure” often have limited access to grocery stores that sell fresh fruits and vegetables, or lack resources necessary to keep and prepare fresh foods, leading them to rely on accessible, cheap, processed, foods that are high in fat, salt and calories, but low in nutrition.

Food stamp programs help reduce children’s risk of obesity, hypertension, and diabetes as adults, by increasing access to healthier foods. Cuts to food stamps undermine progress in the fight against obesity, by taking funding away from programs that make healthier foods more accessible and affordable for low-income families.

Food stamps also lift families out of poverty by covering most food expenses, and helping stretch meager wages to pay for housing and other necessities. According to the USDA, since the 2009 expansion food insecurity among food stamp recipients declined by 2.2 percent, while food spending rose 4.8 percent.

Every dollar of food assistance increases the quality of a family’s diet, improves health outcomes, an helps sustain local economies and jobs. Every dollar cut from food assistance programs takes a little bit of those gains with it.

The “Insanity” of Cutting Food Stamps

The economic costs of food stamp cuts ripple outward from the human costs. In a New York Times column on “The Insanity of Our Food Policy,” Joseph Stiglitz explains how House Republican’s proposal to cut $40 billion from food stamps increases inequality.

The proposal is a perfect example of how growing inequality has been fed by what economists call rent-seeking. As small numbers of Americans have grown extremely wealthy, their political power has also ballooned to a disproportionate size. Small, powerful interests — in this case, wealthy commercial farmers — help create market-skewing public policies that benefit only themselves, appropriating a larger slice of the nation’s economic pie. Their larger slice means everyone else gets a smaller one — the pie doesn’t get any bigger — though the rent-seekers are usually adept at taking little enough from individual Americans that they are hardly aware of the loss. While the money that they’ve picked from each individual American’s pocket is small, the aggregate is huge for the rent-seeker. And this in turn deepens inequality.

The nonsensical arrangement being proposed in the House Republicans’ farm bill is an especially egregious version of this process. It takes real money, money that is necessary for bare survival, from the poorest Americans, and gives it to a small group of the undeserving rich, in return for their campaign contributions and political support. There is no economic justification: The bill actually distorts our economy by promoting the kind of production we don’t need and shrinking the consumption of those with the smallest incomes. There is no moral justification either: It actually increases misery and precariousness of daily life for millions of Americans.

Congress should cut corporate America’s “free lunch,” not food stamps. Wealthy corporate executives can afford to pay their own lunch tab. America can’t afford to become a country that feeds the rich and abandons the poor and hungry.

About Terrance Heath

Terrance Heath is the Online Producer at Campaign for America's Future. He has consulted on blogging and social media consultant for a number of organizations and agencies. He is a prominent activist on LGBT and HIV/AIDS issues.